The holidays are here, and you might be wondering: is it really better to give than it is to receive? When you get a present, it might make you happy for a short time. But when you give by donating money or volunteering for a cause you believe in, the rewards last longer than any toy, gadget, or check from Grandma! In this issue of The Vault from Biz Kid$, we talk about how to find opportunities to give time and money to good causes.

Some people are really serious about giving to charity. Scroll down to find a link where you can learn more about an incredible donation!

Now Is the Time

With the economy in bad shape, many people don’t have much to spare for donations. Yet this is the time when social service organizations need help the most, because demand is high. If you can spare your time, talents, or skills, it’s a great moment to pitch in.

What is a nonprofit organization?

Nonprofit organizations put profits–the money left over after expenses–back into programs and services rather than distributing them to shareholders and executives. That’s because they exist for some other purpose than just to make money–usually a social or educational cause like feeding the hungry or promoting literacy. Most colleges and universities are nonprofits, too. When you give money to a not-for-profit, it’s called a “donation,” and you can usually deduct it from your taxes.

What do you care about?

If you’re going to be giving away your time and money, it helps to have a cause you’re passionate about. You shouldn’t have any trouble finding one–as of 2006 there were almost a million charities in the United States! There are charities for people, pets, education, literacy, sports–you name it.

One of the very best things to give is time. Organizations are always looking for volunteers to help. That could mean tutoring, packaging food, stuffing envelopes–whatever. Some opportunities might require you to go with a parent or guardian–so get the whole family involved! It’s a fun way to meet people, learn new things, help a good cause, and even build up your resume. Here is a great site for finding volunteer opportunities in your area: http://www.volunteermatch.org/

If you’re giving your time and money to an organization, you should think of it as an investment. Are they legitimate? Is your money being spent on the cause, or on administrative expenses inside the organization? A good way to find out is to use a charity rating Web site like http://www.charitynavigator.com. But some smaller or more local charities might not be listed–that doesn’t mean they’re not great choices. The important thing is to find a cause you believe in and make sure the charity is for real.

Q: What are “tax-deductible contributions?”
A:  When you give money to a charity that has obtained tax-exempt status from the Federal Government, you can deduct the amount you gave from your taxes (subject to certain limitations).  For example, let’s say that your income for 2008 is $20,000. If you gave $100 to the YMCA, $100 to the ASPCA, and $100 to United Way, your taxable income will be $20,000 – $300 = $19,700. Usually, you can only deduct contributions up to a certain percentage of your gross income, and you must be eligible to submit itemized deductions.

John Paul Pigéon is a 12-year-old financial guru from Fort Worth, Texas who helps kids learn about money and business. Visit his Web site at www.johnpaulpigeon.com. Send your question to askjohnpaul@bizkids.com. It may be selected for our next newsletter!

Click this clink to see some of the most amazing donations in history–including Warren Buffet’s $30 billion pledge!
http://money.cnn.com/galleries/2007/fortune/0702/gallery.biggest_donations.fortune/index.html

This page has a great list of ideas for volunteering:
http://www.kidsturncentral.com/holidays/christmas/volunteer.htm 

Here’s some great info from the U.S. government on figuring out if a charity is legitimate or not:
http://www.ftc.gov/bcp/edu/pubs/consumer/telemarketing/tel01.shtm

Here’s everything you need to know about tax-deductible contributions:
http://www.irs.gov/publications/p526/index.html
And don’t forget to check out the BizKids Web site where you can get the latest scoop on all things biz:
https://bizkids.com

Scams to separate people from their money have probably been with us for thousands of years. And with the Internet, you don’t even have to leave your house to lose your shirt! In this issue of The Vault, we talk about how to keep from being tricked out of your hard-earned cash.

How much would you pay for the Brooklyn Bridge? Scroll down to learn all about a con man who sold it to unsuspecting tourists–many times!

You get a great deal on a DVD player on an auction site. You pay the bill, but either you get something else than you ordered or nothing at all.

This scam is big business in Nigeria and is named after the part of the Nigerian criminal code dealing with fraud. You get an e-mail from a powerful person in a foreign nation asking you to help them get their money out of a country facing political upheaval. They send you a check. You deposit it in your account and send them the balance by wire, keeping a “fee” for yourself. By the time the check is discovered to be fake, you’re on the hook for the money you wired to the scammer.

Phishing

You receive an e-mail that looks like it’s from your bank, asking you to provide your account information by e-mail or on a Web site to fix a problem with your account. The real problem is that the request is fake–and the people behind it are thieves waiting to raid your savings.

To start an exciting career working at home (stuffing envelopes or doing medical billing, for example), you are asked to “invest” hundreds or thousands of dollars in a “starter kit.” You find out too late that the kit is worthless.

Your friend tells you that you can get a great discount on cool products and maybe even make lots of money by becoming a “distributor.” It’s someone you trust, so you sign up. You are pressured to sign up other “distributors,” who pay fees to you, while you pay fees to your friend…ultimately only benefiting the people who started the scheme. This is a “Ponzi scheme”–for more on that, see this month’s “Ask John Paul” column, below.

Successful tricksters work hard to blend in. They know how to get people to trust them. Otherwise, they’d never get away with it! Sometimes you might even get sucked into a scam by someone you trust who doesn’t know that they are being taken.

It’s not always easy to tell when a deal is fake, but here are some sure signs:

• You are offered “something for nothing”–huge returns on a small investment, for example. Ask yourself this: if it’s such a good deal, why isn’t everybody doing it?
• The deal is said to be “top secret” and you’re not supposed to tell anyone else. Most legitimate businesses have nothing to hide.
• You are asked to provide your personal information over e-mail or by someone who calls you on the phone. Banks and other companies never do that.
• You are asked to put money up for something where the details are unclear. If you don’t understand how it works, don’t waste your time.

Q: I recently heard the term “Ponzi Scheme.” What does it mean?

A:  The Ponzi scheme is named after Mr. Charles Ponzi.  Mr. Ponzi told investors that he would double their money in 3 months by buying special stamps and selling them at a profit.  Only a few people put their money in at the beginning. Sure enough, they got what they were promised. People told their friends about this “great investment” and more and more people invested. What really happened was that people were paid out of other people’s investments–Ponzi never bought or sold stamps at all. He managed to scam $15 million out before he was exposed. Many people never got their money back, and Ponzi spent several years in prison.

John Paul Pigéon is a 12-year-old financial guru from Fort Worth, Texas who helps kids learn about money and business. Visit his Web site at www.johnpaulpigeon.com. Send your question to askjohnpaul@bizkids.com. It may be selected for our next newsletter!

Click here to learn all about the famous con man who sold New York landmarks to gullible tourists:

http://en.wikipedia.org/wiki/George_C._Parker

Here’s some information from the Better Business Bureau on avoiding investment scams:
http://www.bbbmoneynow.org/?lid=1&page=avoidingscams

This is a great site for learning more about what to watch out for in multi-level marketing:
http://www.mlmwatch.org/

And don’t forget to check out the BizKids Web site where you can get the latest scoop on all things biz:

https://bizkids.com

It’s payday! Whoo-hoo! But wait a second–looks like a little mousie has been nibbling at your total. FICA? SOCSEC? Who are these mysterious organizations who shave a little off of every dollar you earn?

There’s nothing mysterious about them–it’s your friend Uncle Sam, a.k.a. the U.S. Federal Government, and those are the taxes you pay when you work in the U.S. It’s called “withholding.” You can’t avoid paying taxes, but at least you can know what they are and why you pay them.

This famous musician spent years paying $19.7 million in back taxes. He blamed the deficit on bad advice from his accountants–and had the self-confidence to spoof his tax troubles in a 2003 Super Bowl commercial in 2003. To learn who it is, scroll down for a link to the answer!

Let’s take a look at the big withholding categories. Depending on your employer and your state, you may see other deductions other than the ones we list here. But just about everyone will have to pay these. Next to the name, we list the common abbreviations that you might see on your paycheck.

These taxes are used to keep the Federal Government running. They pay for things like the armed forces, the Federal Bureau of Investigation (FBI), the Environmental Protection Agency (EPA), the salaries of administrators and congresspeople, and tons of other government programs. And a big chunk pays the interest on the national debt–almost $430 billion in 2007!

You pay: 10% to 35% of what you earn, depending on how much you make.

You get: the Federal Government!

FICA is the Federal Insurance Contributions Act. Social Security is the part of FICA that provides monthly income to people when they retire from work or become disabled and can’t work.

You pay: 6.2% of your pay up to $102,000.00

You get: Social Security benefits when you retire or are disabled. Usually, the more you pay into Social Security over your life, the more you get out when you retire.

Medicare provides health insurance to people who are 65 or older and the disabled. The Federal government also helps pay for state-run Medicaid, a medical insurance program for low-income families.

You pay: 1.45 % of your pay up to $102,000.00

You get: Medical insurance when you retire or are disabled.

If you work for someone else, you’re only paying half of your payroll taxes. Your employer pays the other half, plus some other things like federal unemployment insurance tax. But if you work for yourself, you pay both portions. Who said self-employment was easy?

Q: What are automatic 401(k) deductions?

A:  A 401(k) account holds money that you can use when you retire. With automatic 401(k) deductions, your employer puts a certain amount of money in one of these investment accounts for you. The advantage to this method is that you get to do it with pretax dollars–the money put into the 401(k) is not taxed. And most of the time, the employer matches your contribution. So if you put in $100, your employer will add $100–you have just doubled your money! The money may be invested automatically, or you can choose how you wish to invest it. A 401(k) plan can be a great tool for building wealth!

John Paul Pigéon is a 12-year-old financial guru from Fort Worth, Texas who helps kids learn about money and business. Click here to visit his Web site. Send your question to askjohnpaul@bizkids.com. It may be selected for our next newsletter!

To make it as a theater and voiceover artist, Caety does a lot of different jobs–and gets a lot of different kinds of paychecks. She tells us how she keeps it all straight
Tell us a little about the work you do.
I graduated from an arts conservatory in 2006 with a degree in theater and jazz vocals and fell into voiceover industry. I also act in plays.
And you get paid in different ways?
Yes, for voiceover work, I get paid through an agent who handles my booking. They don’t withhold any taxes from my paycheck. A lot of my acting work is paid through the Actors Equity Union. They do withhold taxes, and they also take some out for the health plan they provide.
What do you do when your employer doesn’t withhold taxes?
I save 10% of those paychecks in a special account so I can pay my taxes at the end of the year! It’s fun to get a big paycheck but you have to be steadfast in saving some of it. There’s no avoiding taxes.
Sounds like a challenge.
I feel lucky to have so much control over my finances, but budgeting has been a big lesson.
How do you keep it all organized? 
I invested in a fancy filing cabinet–it’s all flowered and girly. It represents my commitment to staying on top of my finances–and makes it more fun.

Do you know a Biz Kid who should be featured in our newsletter? Send him or her our way at profiles@bizkids.com!

Click here for the answer!
http://www.youtube.com/watch?v=o6QlgsolmCk

An in-depth guide to your paycheck:
http://www.adp.com/mypaycheck/

Information on the national debt, where a lot of your taxes go:
http://www.treasurydirect.gov/govt/reports/ir/ir_expense.htm

And don’t forget to check out the BizKids Web site where you can get the latest scoop:
https://bizkids.com